Ofcom wants investment in fibre

The UK telecoms regulator has warned that the UK's current access network, at some point in the future, will run out of steam as consumers demand faster and faster access.

By
Tom Jowitt
| Sep 27, 2007

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The UK telecoms regulator has warned that the UK's current access network, at some point in the future, will run out of steam as consumers demand faster and faster access.

However Ofcom insisted that the private sector will have to foot the bill for any new fibre network, despite a warning that the UK regulator may well have to take more interventionist measures.

Launching a two-month consultation period, Ofcom CEO Ed Richards said the arrival of so-called next generation access networks (or NGA) “will probably be the most fundamental change to the country’s core infrastructure for the next 20 years”.

The former UK incumbent BT has already said it was considering rolling out fibre to the node, but only if the economics were right.

Ofcom pointed out that “the picture for broadband take-up in the UK is good.” It believes that regulation had contributed to an “effective broadband market in the UK,” where broadband is available in over 99 percent of the UK, and over half of UK households have taken up broadband.

It also points out that the average headline speed has doubled in a year to reach 4.6Mbit/s and broadband prices have fallen by 9 percent in the last twelve months.

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But it warns that the existing networks will at some point be unable to deliver the very high speed broadband service that may be demanded by bandwidth-hungry customers and business, when IPTV services for example start to become a commercial reality.

Ofcom and the UK government insist that the private sector has to pay for a new fibre network.

At the moment, two options are being considered, namely “fibre to the node” or “fibre to the home”. Ofcom thinks that the build cost of a fibre to the node network would be in the region of £7bn, whereas laying fibre to the home would cost in the region £15bn, as much more digging would be needed.

BT’s network has the highest geographical reach of any in the UK, and is consequentially the most obvious candidate to build a fast broadband network. Virgin Media (formerly NTL) has a cable network that reaches only 50 percent of the UK population.

“Investment in NGA will represent a substantial commercial risk and the market should decide where and when it will be made,” warned Richards. “We want to ensure there are no barriers to investment and provide a clear regulatory environment which will help encourage investment.”

Richards, quoted in the Financial Times newspaper, predicted the emergence of a patchwork quilt of fixed-line and wireless networks for fast broadband, rather than one “Stalinist” solution.

This private sector approach means that due to economic realities, urban areas (with the highest population density) are likely to benefit from any new superfast (fibre) network build, whilst rural communities will have to make do with the existing copper based network. This is reflected by the number of the urban local loop unbundled exchanges, compared to rural exchanges.

To try to encourage investment in fibre, Ofcom is considering reducing the price controls that it applies to the broadband market, although it said households should not have to pay more for existing services.

Richards was also quoted in the FT as saying that the UK should not panic because the country is falling behind its main European rivals in building broadband networks.

Ofcom said that the market and infrastructure conditions in the UK are very different to those countries where investment in fibre has already been strong. The reasons for this include the relatively mature pay TV market in the UK, where Sky for example has a client base of more than 8 million UK households.

And it seems that the lobby organisation, the Broadband Stakeholder Group, agrees with Ofcom’s reasoning in this regard. However, it does think that “there may be a need in the future for Ofcom to take more interventionist measures if evidence emerges that the UK economy could suffer from delayed deployment of NGA.”